5 May 2017 | By Siddhartha Thyagarajan Insight

India: land of opportunity

As the UK seeks to strengthen its relationships with countries beyond Europe, India is high on the agenda

With one eye on the forthcoming general election and another on Brexit, Britain is looking at deepening its economic relationship with non-EU countries. In India, there are opportunities and challenges for UK companies, and both countries have taken strides to develop the relationship. Theresa May made India the first country outside of Europe she visited after becoming Prime Minister, and further collaboration has followed. India’s Minister of Finance and Corporate Affairs, Arun Jaitley, led a business delegation to the UK in February. This was followed, after the triggering of Article 50 in April, by the UK Chancellor Philip Hammond’s visit to India for the ninth Economic and Financial Dialogue meeting, on the theme “Make in India, Finance in the UK”.

To coincide with the visit, CBI India, the Department of International Trade and the UK India Business Council organised a roundtable discussion on our recently published Sterling Assets report in Delhi with Parliamentary Under-Secretary for Trade, Mark Garnier, and Commercial Secretary to the Treasury in Delhi, Baroness Neville-Rolfe.

The issues discussed provide a snapshot of opportunities and challenges for several sectors in India and for Indian firms aiming to invest in the UK.

Skills development

Indian Prime Minister Narendra Modi’s “Make in India” programme presents an opportunity for manufacturing skills development. As more foreign manufacturers do business in India, the resulting skills gap could be plugged through collaboration with UK skills providers and financed collaboratively.

Digital finance

More than a billion people across the country are being encouraged to join schemes to set up digital bank accounts in India. India’s central bank hopes that 90 per cent of the population will have access to banking services by 2034. British digital technology companies are keen to collaborate on the Indian government’s financial inclusion programme, in particular on e-commerce in the form of digital wallets and m-banking - India has 220 million active smartphone users. Barclays Rise is piloting a UK-India “FinTech” (digital finance) exchange programme, and the UK Chancellor highlighted the transformational potential of FinTech.

Meanwhile Mr Modi’s government is working on connecting the entire country digitally. One of the major challenges is extending connectivity deep into rural areas to ensure all of India has access to the internet. But this is also an opportunity for UK telecoms and internet companies, in supporting the development of a national digital grid.

Masala bonds

The Indian government hopes to internationalise the rupee by integrating the Indian economy more with global markets through government-issued “masala bonds”.

Masala bonds allow Indian entities to raise money from overseas financial markets in rupees. The rupee-denominated bonds are issued to offshore investors and settled in dollars, so that the currency risk sits with the investor rather than the borrower. The Reserve Bank of India hopes in this way to enhance the flow of Indian currency in international markets, increasing the value of the rupee.

Masala bonds have the potential to raise $5bn over the next two years, helping to meet the shortfall in finance for India’s infrastructure and construction needs in the coming decades.


While the number of UK insurance companies active in India has significantly increased, the sector faces challenges from the new tax regime that the Indian government plans to introduce. The Goods and Services Tax (GST) will mean life insurance companies have to register and comply with GST law separately in each Indian state, something that has not previously been required. Insurers would need to file multiple returns and would be subject to audit and assessment in each state by central and state tax authorities. This would significantly hamper business for insurance companies in India and is an area that the Indian government needs to address.

Trade and migration

Investors are concerned that the Model Bilateral Investment Treaty (Model BIT) proposed by the Indian government to replace the existing BIT would significantly reduce investor protection, and there are calls for investor protection clauses to be introduced into the new BIT.

Indian trade bodies such as the Federation of Indian Chambers of Commerce and Industry (FICCI) want to hasten the signing of a trade agreement between Indian and the UK to create business certainty. They believe that the UK could support Indian companies active in the UK by viewing migration as a business matter rather than a social issue.

Future opportunities

UK investment in India is primarily focused on nine of India’s states, according to Invest India. These already developed states are the “first engine of growth”. Investing in the second and third “engines of growth” - which should see accelerated development over the next 12 and 18 months - should lead to greater rewards for companies that move early. 

Specific areas of opportunity for investment include security services, but greater clarity is needed from the Indian government on the liberalisation of such services. Football is also on the rise in India, with UK companies tipping states such as Delhi, West Bengal and Goa as sources of untapped talent.

Both the UK and India view each other as important economic partners. Companies that move early to explore the opportunities that the UK-India relationship offers could benefit greatly. Meanwhile, governments on both sides need to ensure that the challenges that companies face are tackled in a speedy and efficient manner. 

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